By Bryan Koenig
A California federal judge floated the possibility of appointing separate counsel Thursday for a class of indirect cathode ray tubes purchasers, after saying he shouldn’t have cleared a $576.8 million bundle of antitrust settlements and admonishing the current attorneys for “a classic indication of a potential conflict of interest.”
U.S. District Judge Jon S. Tigar didn’t just reject the class’ bid for an “indicative ruling” showing if he’d be willing to carve out $6 million from the deal’s $158.6 million attorneys’ fees award for residents of three states originally excluded from the massive settlements. He also expressed “concerns about the adequacy of the counsel who negotiated that settlement or whether they may have faced a conflict of interest.”
“While the court acknowledges lead counsel’s efforts to obtain a favorable result for the majority of the class, pitting one set of clients’ claims against those of another is a classic indication of a potential conflict of interest,” Judge Tigar said, referring to Ninth Circuit oral arguments in April where class counsel, fighting objectors from the excluded states contesting the settlements, said they needed to release the claims of some class members to get compensation for others.
“Even now, lead counsel appears to be bargaining with the court to reduce the perceived value of the claims of class members in the omitted repealer states. And regardless of whether the issue is framed as one of conflict of interest or adequacy of counsel, it requires further exploration and potentially the appointment of separate counsel,” Judge Tigar continued. “It may also suggest an adjustment to the fees awarded to lead counsel. These issues cannot be decided on the motion as currently framed.”
The class first sought the indicative ruling at the beginning of October, with the stated intention of asking the Ninth Circuit for a “limited remand” if the judge said he’d be willing to carve out $6 million from the attorneys’ fees award for the excluded states. The bid was in reaction to heavy criticism from the appeals panel over the settlement’s exclusion of people in Massachusetts, New Hampshire and Missouri.
The idea was to avoid an appellate decision on the challenge to settlements between the indirect purchasers and the electronics companies — including Philips Electronics North America Corp., Panasonic Corp. and Samsung SDI Co. Ltd. — that would resolve consolidated multidistrict litigation.
At least one part of the case remains ongoing, however, as China-based Irico Group Corp. and a subsidiary claim they should be granted sovereign immunity because they are controlled by the Chinese state.
The MDL, which has also seen settlements with direct purchasers, centers on claims that the companies divvied up the cathode ray tube market and cut down on supply to boost prices of CRTs used in televisions and computer monitors from early 1995 through late 2007. Judge Tigar approved the last of the deals in July 2016, amid objections by indirect purchasers in Massachusetts, Missouri and New Hampshire, and two state attorneys general.
Approving that settlement, Judge Tigar said Thursday, was a mistake given “the benefit of hindsight.”
“Most fundamentally, the court erred in approving the provision that required class members in Massachusetts, Missouri, and New Hampshire … to release their claims without compensation. The fact that the claims were required to be released meant they had value,” he said.
Judge Tigar also seems to have taken to heart concerns raised by the objectors at the Ninth Circuit, where their attorneys said lead class counsel Mario Alioto of Trump Alioto Trump & Prescott LLP committed legal malpractice by dropping lead plaintiffs in the states from the litigation just before reaching the settlements.
The objectors’ attorneys also argued Alioto had wrongly claimed consumers in those states didn’t have viable claims, even though he had a duty to represent everyone in the class and vigorously prosecute their claims.
Alioto, Judge Tigar said, “had an obligation to vigorously represent class members” in the left-out states. Lead class counsel had said that excluding the three states was fair to their residents because their claims were “worthless,” and thus there’s no conflict, according to the ruling.
“That argument does not explain, however, how negotiating a release of those class members’ claims can be squared with the duty of zealous advocacy to all members of the class,” said the judge, who stated that he hasn’t yet reached any conclusion about appointing separate counsel.
The indirect buyers say they have resolved the appeals of four of the original seven groups of objectors and that three remain. Those outstanding objectors argued last month, however, that the “paltry” $6 million carveout seeks to “impose a constitutionally deficient and unfair settlement” on them. They said the three states’ real claims actually total $283 million.
Alioto did not immediately respond to a press inquiry late Thursday.
An attorney for the objectors, Robert Bonsignore of Bonsignore Trial Lawyers PLLC, praised the judge Thursday for admitting his mistake.
“The district court showed great judgment and strength in evaluating what had transpired to date. And came down with a very strong ruling that was correct,” Bonsignore told Law360. “It’s exactly what we’ve been saying all along. It’s exactly what we told the appeals court.”
The objectors are represented by John Crabtree of Crabtree & Auslander LLC, Robert Bonsignore of Bonsignore Trial Lawyers PLLC and Polly Estes of Estes Law Group.
The indirect purchasers are represented by Mario Alioto, Joseph Patane and Lauren C. Capurro of Trump Alioto Trump & Prescott LLP.
The appellate cases are Indirect Purchaser Plaintiffs v. John Finn et al., case numbers 16-16368, 16-16371, 16-16373, 16-16374, 16-16377, 16-16378, 16-16379, 16-16399 and 16-16400, in the U.S. Court of Appeals for the Ninth Circuit. The underlying case is MDL No. 1917 In re: Cathode Ray Tube (CRT) Antitrust Litigation, case number 3:07-cv-05944, in the U.S. District Court for the Northern District of California.
–Additional reporting by Matt Bernardini. Editing by Breda Lund.